First of all, calculate your initial monthly payment for this loan based on the teaser rate. Secondly, if you are still in the loan after five years, what will your new rate AND payment adjust to if the 1-year LIBOR at that time is 3.1%

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.